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  1. #1
    Join Date
    Jul 2002
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    130

    How do you handle customers who never pay on time?

    I seem to have a few customers who never pay on time....A few are online payments, and at least two more are on recurring monthly billing where we charge their credit cards every month.

    Let me talk about one of the credit card clients in particular...he has a reseller account....we started out with one credit card number, and it would always get declined....every month his bill is due on the 15th, and we'd try almost daily to run this through....

    Starting on about the 20th we would send him emails telling him that his card was not going thru, to please contact us with alternate payment arrangements. Starting on about the 25th we'd start trying to call....At first we'd end up either getting him on the phone, or his card woud finally go through.

    Now, the last three months we've actually had to end up suspending his account (between the 25th and 30th)...he won't answer emails, nor does he answer his "web hosting business" phone.

    He has about 20 clients on this reseller plan, and we hate to cut off the websites...but this is the only way to get his attention

    Last month he gave us a second CC number to use, and this month again we cannot get approval on either card.

    I would like to say that we are a "real" business, and we are financially "ok"...so it's not that we are strapped for the money.

    My QUESTION IS THIS....

    What is everyone's policy on this type of situation?

    Should we be giving the client longer to pay before we suspend them? (We also have a local ad agency, and it is nothing to have clients 60 to 90 days in arrears).

    Would we be justified in charging maybe a $20.00 re-instatement fee once an account has been suspended?


    Any thoughts are welcome.

  2. #2
    Join Date
    Aug 2001
    Location
    Canada
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    If this occurs more than, let's say, once a year... well, then I'd simply boot him off my server. Everybody has to pay their bills in time, but maybe this is fair:
    - charge penalties (late fees) (x% per day)
    - close the account after X days.
    www.idologic.com - Reseller, VPS and dedicated hosting - Friendly Customer Service - DirectAdmin - cPanel - InterWorx

  3. #3
    Join Date
    Aug 2000
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    1,167
    I would be in favor of a reinstatement fee, maybe more than $20. It is not unheard of for hosts to do this. The fact that he keeps ditching credit cards is rather suspicious, though.

  4. #4
    Join Date
    Dec 2000
    Location
    Montreal
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    are you kidding, late payers are a reality of web hosting, kicking out people for paying late is just bad business ethics and it's placing ego above proper management. No way you should do that. When they said hosting is hard work it is means that you have to stuff like acount receivables every once in awile. If you ask me, don't suspend unless you lose a lot of money. YOu need to be organised and consistent with your demand for payments. Clients are not all business people and whther it is justified or not when you suspend them they get emotional and they tend to leave. WHich clearly it is the opposite of what a businessman would want
    As much as some clients might be annoying as long as they don't abuse the system they are the ones that put food on your plate.
    Or gold in your hand
    Last edited by sharkman; 10-25-2002 at 04:05 PM.

  5. #5
    Join Date
    Jul 2002
    Posts
    130
    alchiba....

    The cards are legit, he is simply either
    1. over his limit, or
    2. behind on his payment...
    so they are getting declined.

    Sharkman.....
    So how long do you normally wait for payments? What is the normal time to wait?

  6. #6
    Join Date
    Dec 2000
    Location
    Montreal
    Posts
    539

  7. #7
    My opinion is suspend them sooner, if its the only way your getting payment, anyone telling you that isn't a good business practice doesn't run a real business. when you handling a million dollars a month in payments and 50% of your clients don't pay you on time, how much money are you losing on that half a million in say 15 days, how much is it costing you to attempt collections on it in manpower? how much is it worth it to you to fund someone else's business? how late will your suppliers allow you to be on your payments? receivables are the largest headache of any business and your CFO or accountant will tell you time and time again how much those receivables are costing you. there are of course exceptions to any rule but this is what I do and it works extremely well. charge the account on the due date, if not paid send a suspension notice automatically for 3 days from that time, the client will either
    a. write in and explain the situation in which case you extend the time appropriately.
    b. they will write in to give you another method of payment
    c. they will ignore you
    after c (wait the time ) suspend the account within a few hours they will have a method of payment and the account is all fixed up.
    This does not mean you can not afford to run your business if you demand payment for services rendered. it means you can not afford to fund someone elses business, nor should you try.

    Steve

  8. #8
    Join Date
    Aug 2000
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    1,167
    Originally posted by sharkman
    kicking out people for paying late is just bad business ethics and it's placing ego above proper management.
    True, late payments are part of business life and I accept that. However, I see no problem with canceling service if a customer habitually goes AWOL and you have to spend valuable time tracking him/her down on a regular basis. The bad ethics in this case is on the part of the client. Proper management also means cutting your losses.

  9. #9
    Join Date
    Dec 2000
    Location
    Montreal
    Posts
    539
    Yes I agree.
    Everything is in porportion. really the question is how much money are you losing. For me as an example I charge in average $25 per shared client. My average shared client does not waste huge mount or resource, which means it well worth keep on going and dealing with the hassle. On the other side if you charge many clietn 8.95 and they use their ressource to the max, you might not want to deal with them.

    So I guess it is really a matter of the situation. I think keeg has a really good input on how would you deal with the client if you choose to suspend the clinet sooner, but just remember that sometimes the cost and time of account receivable do worth the money coming from annoying clients, especially when you just start a company

  10. #10
    Join Date
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    Canada
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    Originally posted by sharkman
    are you kidding, late payers are a reality of web hosting, kicking out people for paying late is just bad business ethics and it's placing ego above proper management.
    When I don't pay my rent, cable, etc. -> then they charge me late fees, HOWEVER if I'm X days late... well, then they kick me out, cut of cable....

    business is not charity... Don't get me wrong, I won't kick someobody off for not being on time once... but consistently? I'm sorry, but I don't need your business.
    www.idologic.com - Reseller, VPS and dedicated hosting - Friendly Customer Service - DirectAdmin - cPanel - InterWorx

  11. #11
    Join Date
    Aug 2001
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    Canada
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    Originally posted by Keeg
    charge the account on the due date, if not paid send a suspension notice automatically for 3 days from that time, the client will either
    a. write in and explain the situation in which case you extend the time appropriately.
    b. they will write in to give you another method of payment
    c. they will ignore you
    after c (wait the time ) suspend the account within a few hours they will have a method of payment and the account is all fixed up.
    This does not mean you can not afford to run your business if you demand payment for services rendered. it means you can not afford to fund someone elses business, nor should you try.

    Steve
    well said...
    www.idologic.com - Reseller, VPS and dedicated hosting - Friendly Customer Service - DirectAdmin - cPanel - InterWorx

  12. #12
    Join Date
    Feb 2001
    Posts
    1,227
    you can always try the DIRTY method... and that is take the files hostage. For example, every day that it is overdue, take 5% hostage until full payment has been made.
    I have servers at: NetDepot/GNAX (A), SoftLayer (A), LiquidWeb (B+), DedicatedNow (B+), Nectartech (B) and more!

  13. #13
    Join Date
    Dec 2000
    Location
    Montreal
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    539
    Originally posted by dhabets


    When I don't pay my rent, cable, etc. -> then they charge me late fees, HOWEVER if I'm X days late... well, then they kick me out, cut of cable....

    business is not charity... Don't get me wrong, I won't kick someobody off for not being on time once... but consistently? I'm sorry, but I don't need your business.
    first of all when you pay the rent, they wait and wait a lot. Nobody kicks you out after a month or even two months. When it comes to cable on the other you are dealing with a multi international corporation that is most likely dominating your entire region. Web hosting is one of the most competetive industry on the market, a client easily leave and probably find a better deal.

  14. #14
    Join Date
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    Location
    Montreal
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    let me give you a good example. My brother runs a coffee office supply. He it the seventh biggest supplier in Canada. The reason why I am mentioning it, is not to brag but to tell you that when he deals with corporations many tend to be late, sometimes unpurposly. Not because they hate my brother but because they can, and they save a bit money on interest. Well let tell me you my brother keeps on on delivering and he does not stop nor suspend their weekly delivery unless they really abuse the system. On the other side he keeps on working on account receivables. It is a realisty of business. If the client is small then he doesn't care. Well the morale of the story is, that it really depedns on what client you deal with.

  15. #15
    Join Date
    Jul 2002
    Location
    India
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    one real dirty trick to pull is make him Un-Transparent to his customers LOL ....

    otherwise ... in regular business practises you can't do much in most cases ... but you can charge him extra for late payment at least .
    http://www.featuredhost.com | mailto: [email protected] | ASP.NET-MS SQL-Cold Fusion hosting| Cheap domain registration | MSN : [email protected] |

  16. #16
    I think you need to figure out if it's profitable to keep him as a customer. How much is the time worth that you are putting into getting money out of him. And is it more or less than what you are getting out of him. If you spend 4 hours / month getting money out of a guy that's only going to pay 19.95 (example). I would suggest dumping the client. If you're spending 1 hour / month supporting a client, that's ok for 19.95 / month. If you are having to chase and support for 19.95 / month it's probably not worth it. You need to keep the quality of your support up for the paying customers. They will in turn bring more clients your way.

    Best Regards,
    --Ben
    BEN HALSTED, Developer :: WebGroup Media LLC.
    Cerberus Helpdesk 2.4.0 -- Take Control of your Company Inbox!
    Combat Spam. Improve Response Times. Share Knowledge.
    http://www.cerberusweb.com/

  17. #17
    Join Date
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    Originally posted by sharkman


    1 - first of all when you pay the rent, they wait and wait a lot.
    Nobody kicks you out after a month or even two months.

    2 - Web hosting is one of the most competetive industry on the market, a client easily leave and probably find a better deal.
    1 - Okay, you have 30 days for eviction... but still... if you're a persistent late payer, then they require certified cheques

    2 - If I'm not offering the client "the better deal" then why would they want to be with me anyways?

    Again, I follow the law when it comes to late payment and yes I charge interest (max. amount) and in my books if I have to chase you to get payment... well, then forget it!

    I like to get new business and keep business, but I'm not desperate for it either.
    www.idologic.com - Reseller, VPS and dedicated hosting - Friendly Customer Service - DirectAdmin - cPanel - InterWorx

  18. #18
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    Originally posted by sharkman
    It is a realisty of business. If the client is small then he doesn't care.
    Agreed, I'd be more flexible if the client has been with us for a while or if it's a large volume client, but as I said before, I am here to work with clients, but I do expect the same treatment from them as I give to them (i.e. paying on time)
    www.idologic.com - Reseller, VPS and dedicated hosting - Friendly Customer Service - DirectAdmin - cPanel - InterWorx

  19. #19
    Join Date
    Sep 2002
    Location
    Mansfield
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    I'll throw in my .02 - we started getting first & last. Gives them 30 days to pay, I don't lose any money and I can cut them off with no guilt.

    Quicker than anything to get me to cut folks off is ignoring me. No response, cut 'em off.

    Our billing system is capable of shutting off port switches, dropping domains out of DNS, locking mail spools and probably powering off boxes (not coded yet).

    Not being used yet, but....

    We also adopted a "bounced payment" policy - check, credit card, whatever - $25.00.

    Got one guy wo pays more in bounced card fees than in bandwidth, I think

    Brutal? Yes. I know this much - waiting doesn't make them pay any faster.
    GUI admin tools have no honor. It is a good day to vi.

  20. #20
    Join Date
    Apr 2002
    Location
    North Kansas City, MO
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    2,565
    Make the payment due BEFORE a certain day of the month. Say the first. Customers pay a month in advance. So if they're due before the first and there's no money, they get cut off on the first.

    I know this sounds a little harsh, but it works. The customers always know when they'll be shut off. Other wise they try to push it out farther.

    Aaron
    Aaron Wendel
    Wholesale Internet, Inc. - http://www.wholesaleinternet.net
    Kansas City Internet eXchange - http://www.kcix.net

  21. #21
    Join Date
    Dec 2000
    Location
    Montreal
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    Clearly waiting will not get you paid faster but the question is whether you would get paid at all. I don't mean in a direspectful, but if you would have gave me a bouce fee, I would have been so insulted I would leave and charge back as much money as I could from the previous months.

  22. #22
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    Mansfield
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    Originally posted by sharkman
    I don't mean in a direspectful, but if you would have gave me a bouce fee, I would have been so insulted I would leave and charge back as much money as I could from the previous months.
    Why? If it's in the contract and you agreed to it why would you do such a thing?
    GUI admin tools have no honor. It is a good day to vi.

  23. #23
    Join Date
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    Location
    Montreal
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    If his policy is clear on the site he would lose a lot of potatial clients, I personally wouldn't accept such policy unless his deal is amazing. If his policy is not clear I would have been insulted and tried to get my money back. I'm not trying to tell anyone how to run their business but, this is a very competetive industry which so many compnies are offering pretty much the same thing. There is no room for attitude, this is unforuntatly a sucking up Industry . So I agree everyone has to decide where is there threashold. Simple making strict policies like a bouncing fee for anyone might get you paid faster but push or keep clients away.

  24. #24
    Join Date
    Oct 2000
    Posts
    320
    Originally posted by sharkman
    are you kidding, late payers are a reality of web hosting, kicking out people for paying late is just bad business ethics and it's placing ego above proper management. No way you should do that. When they said hosting is hard work it is means that you have to stuff like acount receivables every once in awile. If you ask me, don't suspend unless you lose a lot of money. YOu need to be organised and consistent with your demand for payments. Clients are not all business people and whther it is justified or not when you suspend them they get emotional and they tend to leave. WHich clearly it is the opposite of what a businessman would want
    As much as some clients might be annoying as long as they don't abuse the system they are the ones that put food on your plate.
    Or gold in your hand


    I agree here.
    I have a few dozen customers who just don't pay on time, pay by check or paypal, or whatever. The important thing is they do pay. They don't go over 30 days past due. And did I say.. they do pay?

    If they are a long time customer or valuable to you, just extend a little bit of credit/time for them. This seems to be the norm in this business. I would say at least 30% of my customers credit card failures only last a day or so... but it does happen.

  25. #25
    Join Date
    Sep 2002
    Location
    Mansfield
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    314
    Originally posted by sharkman
    If his policy is clear on the site he would lose a lot of potatial clients,
    Yes, it has cost me clients and sales. It's not on our wholesale site(s) but it is in the contracts. I have not grown as fast as I'd like nor as big as I'd like.
    I do think it says something about the customer when it's an issue, though.
    I also take comfort in the fact that they went somewhere else......
    Incidentally, we are consistent - our billing policies are " due on the first, late on the 5th and cut off on the 10th."

    These policies have grown out of a lot of years in this business, including the insanity of the late 90's. I almost lost it all in '98 because of receivables, and what hit me the hardest was the fact that all the customers who paid well and on time would get screwed the worst. They were being punished for my fear of losing bad payers or cutting them off. I sent out a long email (wish I still had it) explaining all this to my customers, and we would not and could not tolerate late payments any more. We didn't lose any over that and my churn rate seems to be lower than industry standard, about 2-4 % per year.

    In all fairness, if someone stays in touch and tells me good lies (so says the bookeeper) I let them go for awhile.
    If we get ignored they are toast.
    GUI admin tools have no honor. It is a good day to vi.

  26. #26
    Just to put my 2 pence worth in. One of our best customers is a late payer, however I know I will always get the payment from him. Policy's are great as a guideline (Unless it's SPAM), however there is no need to stick to every word with every customer, but you have to remember that at the end of the day you are a business and not a charity.
    Adam Heavens
    Server Centre Limited (www.servercentre.net)
    Exchange 2007 Hosting, Windows/Linux Hosting

  27. #27
    Join Date
    Dec 2000
    Location
    Montreal
    Posts
    539
    damn that's good discussion, I hope the guy on the top is taking notes

    PHBPendragon I don't want it to seem that I'm criticising you I'm sure that you have more expereience than I do But I feel that the reason why you had problems is not because you had debt but because were disorganised with your debts.

    I do definetly agree isolsdotnet policies are made to portect the owner but not necessarily to be followed unless it's necessary

  28. #28

    Re: How do you handle customers who never pay on time?

    Originally posted by EzHost
    My QUESTION IS THIS....

    What is everyone's policy on this type of situation?

    Should we be giving the client longer to pay before we suspend them? (We also have a local ad agency, and it is nothing to have clients 60 to 90 days in arrears).

    Would we be justified in charging maybe a $20.00 re-instatement fee once an account has been suspended?


    Any thoughts are welcome.
    In your case I think you should suspend his account and his account only, don't do that with his resold accounts. Then you can contact him and give him 1 week to fulfill his payment, if he doesn't pay you on time you can let his clients know the fact and tell them to find other hosts or switch to you.
    AceWebHosting.Com
    Cheap Web Hosting - Multiple Domain Hosting - Reseller Hosting - Virtual Private Server

  29. #29
    Join Date
    Dec 2000
    Location
    Montreal
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    I think that's a great plan

  30. #30
    I would charge a reconect fee ($25 on virtual accounts and $65 on dedicated/colo). If they continue to pay late every month I would requre a deposit (usally two months worth of services).

    Usally when you tell them if they are late again they will have to pay a deposit they somehow manage to pay on time
    Multiple Image Corporation - http://www.multipleimage.com
    Diverse Solutions for Diverse Companies.
    Virtual, Dedicated & Colocated Hosting.

  31. #31
    Originally posted by multipleimage
    I would charge a reconect fee ($25 on virtual accounts and $65 on dedicated/colo). If they continue to pay late every month I would requre a deposit (usally two months worth of services).

    Usally when you tell them if they are late again they will have to pay a deposit they somehow manage to pay on time
    they also managed to leave on time also to qnother host instead of paying you

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